In conversation with managing director Diana Sands and partner Alex Wright, Chris Lahoud discusses how Apollo prepares for potential dislocations through scenario analysis and sector mapping, and how the firm approaches capital deployment when high-quality credits become available at attractive valuations.
Diana: How are you seeing credit markets in the early days of 2026?
Chris: Where we ended 2025 from a capital markets standpoint is similar in terms of opportunity. There are many companies that need capital solutions and M&A remains active, which drives deployment opportunities.
You also have hyperscalers investing aggressively in the economy, and that trend has accelerated.
The key question is whether we are in the early innings of a default cycle, driven largely by AI and its impact on software.
What’s unique is that many software companies are not yet showing deterioration in revenue or cash flow. The issue is more around terminal value and whether capital structures remain refinanceable.
Layer on geopolitical risk and you have conditions that could lead to a more risk-off environment. In that environment, marginal companies lose access to financing, which can drive defaults and ratings migration.
It’s always hard to pinpoint what triggers a turn, but if it happens, software may be seen as the final catalyst.
You also have hyperscalers investing aggressively in the economy, and that trend has accelerated.
Diana: Is anything surprising to you about this market so far?
Chris: Markets are consistently complacent. We’ve seen some widening in spreads and some equity volatility, but not broadly negative outcomes. That complacency feels more pronounced now than in recent years.
Diana: What is your team’s opportunity set?
Chris: Within hybrid and opportunistic credit, we do very little traditional distressed investing.
When there are large, profitable franchise companies that do restructurings for whatever reason, we will lean into those opportunities from a first dollar standpoint, we're not doing post-reorg equity type strategies.
Our approach combines catalyst-driven public investing with capital solutions in private markets. We may buy public securities at a discount and then create opportunities through private capital or structured solutions.
We are not sector specialists. We leverage the firm’s sector expertise but focus on understanding the specific credit and how the market perceives it versus our view.
When we identify disconnects, that’s where we generate alpha, typically through senior positions with downside protection. The overarching theme is catalyst-driven investing.
Our approach combines catalyst-driven public investing with capital solutions in private markets.
Alex: When do you decide to lean in versus stay patient?
Chris: Spreads are slightly wider, but most of that movement is in lower-quality credits and software. Higher-quality credits have not moved enough to justify a shift.
Leaning in today often means taking risk in weaker businesses or in software, which we believe is premature.
We think conditions may worsen before they improve. There are early signals in areas like BDC debt, but not enough to justify large-scale deployment yet.
Alex: You mentioned preparation. Can you describe the framework you use?
Chris: In April last year, we had clarity around tariffs, which allowed us to build a framework and identify impacted sectors.
We are doing the same now with AI and software. We’ve built heat maps and scoring systems across credits we own or may own.
The difference is that tariffs were more quantifiable. AI requires continuous reassessment. If we see a broad dislocation, we already know which names are least and most impacted. That preparation allows us to act quickly when pricing becomes attractive.
Q&A is edited for clarity
This interview is part of the "Inside Apollo's Private Credit Platform" series, featuring perspectives from Apollo partners. View all interviews.
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